The Stage Looks Set for Bitcoin to Surpass Its Previous All-Time High, Fueled by a Surge in Global Liquidity, Several Macroeconomic Analysts Argue

In recent weeks, the global macro financial outlook has been showing signs of a shift. Over the weekend, Goldman Sachs economists announced that they had lowered their estimations of the probability of a U.S. recession in 2025 from 25% to 20%.

The stage appears to be set for Bitcoin (BTC) to make another attempt at surpassing its previous all-time high, fueled largely by a surge in global liquidity, several macroeconomic analysts argue.

In recent weeks, the global macro financial outlook has been showing signs of a shift. Over the weekend, Goldman Sachs economists announced that they had lowered their estimations of the probability of a U.S. recession in 2025 from 25% to 20%.

This change came after the latest U.S. retail sales and jobless claims data were released, which suggested that the U.S. economy might be in better shape than many had feared.

The Goldman Sachs analysts added that if the upcoming August jobs report — set for release on Sept. 6 — continues this trend, the likelihood of a recession could drop back to their previously held marker of 15%.

The possibility of such a development has sparked confidence that the U.S. Federal Reserve might soon cut interest rates in September, possibly by 25 basis points.

The potential rate cuts have already begun to impact the markets, with U.S. stock indices, including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, recording their largest weekly percentage gains of the year for the week ending on Aug. 16.

Alongside this relatively positive news for the U.S. economy, global liquidity has also been rising. Historically, increasing liquidity and easing recession fears have often been catalysts for bullish trends in the crypto space.

So, let’s take a closer look at what’s happening globally and how these macroeconomic shifts could impact Bitcoin (BTC) and the entire crypto market in the coming weeks and months ahead.

Liquidity surge across global markets

To understand where BTC might be headed, we need to delve into the mechanisms behind the current liquidity surge and how it could impact the broader markets.

The U.S. liquidity flood

In the U.S., the Treasury appears poised to inject a massive amount of liquidity into the financial system. BitMEX cofounder and well-known crypto industry figure Arthur Hayes stated in a recent Medium post that this liquidity boost could push Bitcoin past its previous all-time high of $73,700. But why now?

One possible explanation is the upcoming presidential elections. Maintaining a strong economy is crucial, and this liquidity injection could be a way to ensure favorable conditions as the election approaches.

But how exactly is this liquidity going to be injected? The U.S. Treasury and the Fed have several powerful tools at their disposal, as Hayes lays out in his analysis.

First, there’s the overnight reverse repurchase agreement mechanism, or RRP, the balance of which currently stands at $333 billion as of Aug. 19, down significantly from a peak of over $2.5 trillion in December 2022.

Hayes explains that the RRP should be looked at as a major pool of “sterilized money” on the Fed’s balance sheet that the Treasury is evidently looking to get “into the real economy” — aka add liquidity. The RRP represents the amount of Treasury securities that the Fed has sold with an agreement to repurchase them in the future. In this process, the buying institutions — namely money market funds — earn interest on their cash overnight.

As Hayes points out, the drop in overnight RRP over the past year indicates that money market funds are moving their cash into short-term T-bills instead of the RRP, as T-bills earn slightly more interest. As Hayes notes, T-bills “can be leveraged in the wild and will generate credit and asset price growth.” In other words, money is leaving the Fed’s balance sheet, adding liquidity to the markets.

The Treasury also recently announced plans to issue another $271 billion worth of T-bills before the end of December, Hayes noted.

But that’s not all. The Treasury could also tap into its general account, the TGA, which is essentially the government’s checking account. This account holds a staggering $750 billion, which could be unleashed into the market under the guise of avoiding a government shutdown or other fiscal needs.

The TGA can be used to fund the purchase of non-T-bill debt. As Hayes explains: “If the Treasury increases the supply of T-bills and reduces the supply of other types of debt, it net adds liquidity.”

If both of these strategies are employed, as Hayes argues, we could see anywhere between $301 billion (the RRP funds) to $1 trillion pumped into the financial system before the end of the year.

Now, why is this important for Bitcoin? Historically, Bitcoin has shown a strong correlation with periods of increasing liquidity.

When more money is sloshing around in the economy, investors tend to take on more risk. Given Bitcoin’s status as a risk asset — as well as its finite supply — Hayes argues